A recent report of the US Senate Permanent Subcommittee on Investigation, a Congressional watchdog panel, has revealed a highly disconcerting development. The report released on July 17, 2012 stated that two Bangladesh based banks, Islami Bank Bangladesh Ltd (IBBL) and Social Islami Bank Ltd (SIBL), were involved in terror financing.
According to the report the British banking giant HSBC supplied dollars to IBBL and SIBL despite evidence of their links to terror financing. HSBC did not submit these two banks to enhanced monitoring for suspicious transactions despite recommendation by HSBC's own Financial Intelligence Group (FIG). Moreover, SIBL's ownership stakes were held by two terrorist organizations.
The US Senate report exposed HSBC´s internal governance failure to control flows of suspect funds. The report further mentioned that Saudi Arabia's Al Rajhi Bank was involved in suspicious transactions. When IBBL wanted to open a US dollar account with the HSBC's US office, questions were raised about the Saudi bank Al Rajhi´s 37 percent ownership in IBBL.
The report pointed out that Al Rajhi Bank was associated with IBBL that provided an account to a Bangladeshi national who had been accused in terrorist bombing. IBBL was fined three times for violating anti money laundering requirements in connection with providing banking services to the Islamic militants.
It further pointed out that Saudi Arabia's Al Rajhi Bank provided a correspondent account to SIBL whose largest single share holder had been the Saudi based NGO International Islamic Relief Organization (IIRO) for many years. IIRO had been implicated in terrorist financing by the US administration and included on the list of those prohibited to do business in the US.
A second shareholder of SIBL was the Islamic charitable society Lajnat-al-Birr-al-Islam also known as Benevolence International Foundation (BIF) that has also been designated by the US administration as 'a financier of terrorism' with whom US nationals are prohibited from doing business. BIF was among the 20 main financiers of al Qaeda.
IIRO had accounts with both IBBL and SIBL, the report revealed. It said two shareholders of SIBL -- IIRO and BIF-- had links to terrorism. "IIRO has also reportedly funded al Qaeda directly as well as several of its satellite groups. Osama bin Laden´s brother-in-law Mohammad Jamal Halifa headed the Philippine branch of the IIRO," it said.
IBBL which ranks among the top three banks in South Asia has 60% of its shares owned by Saudi institutions and individuals. UAE, Kuwait and Qatar are also share holders of this bank which is also inextricably associated with Al Rajhi Bank of Saudi Arabia. IBBL started functioning in Bangladesh in 1975 at the initiative of the then Saudi Ambassador to Bangladesh Al Fuyad.
Over the years IBBL has become the back bone of financial resources of the Islamic militant groups operating in Bangladesh including Jamaat-e-Islami (JEI), widely known to be the fountainhead of Islamic fundamentalism in the country.
The rise of Islamic fundamentalism is intricately linked to the funding received by the militants from their financial backers, sympathizers and associates. One important aspect in this regard has been assessed to be the role played by the fast expanding Islamic banking market.
One estimate has put the Islamic banking segment in Bangladesh as growing at almost 20%, twice the average for the entire industry in the country. Reputed multinational banks including HSBC have evinced keenness to participate in programs under Islamic banking segment in Bangladesh. At present IBBL remains a customer of HSBC's two dozen affiliates.
According to a report of HSBC´s Financial Intelligence Group (FIG), Shaikh Abdur Rahman, chief of Bangladesh´s terrorist outfit Jamiatul Mujahideen Bangladesh (JMB), and his deputy Siddiqul Islam alias Bangla Bhai had accounts with IBBL.
Earlier, Bangladesh Bank, central bank of the country, found that two branches of IBBL had been engaged in "suspicious transactions" and it urged IBBL to take action against 20 bank employees for failing to report suspicious transactions. Six top Islamic militants including JMB chief Shaikh Abdur Rahman and his deputy Siddiqul Islam alias Bangla Bhai were executed in 2007 for killing two judges.
Earlier these two JMB militants spearheaded a movement for introduction of "Allah's rule" and Islamic law in Bangladesh saying 'socialism and democracy were the methods of infidels and these have no place in Muslim land'.
After the synchronized country wide bombing in Bangladesh on August 17, 2005 by the militant Islamic outfit JMB, the role of IBBL in promoting religious militancy came under the scanner. The Home Ministry formed a committee to investigate terror financing following a Bangladesh Bank report mentioning cases of dubious transactions in IBBL.
Subsequent to the arrest of JMB chief Shaikh Abdur Rahman and his second in command Bangla Bhai and seizure of some banking documents, the investigation team found lapses in banking norms and suspicious transactions with IBBL branches in Sylhet, Gazipur and Savar where violation of regulations specified in Anti Money Laundering Act came to notice.
Subsequent to the probe, IBBL was pressurized to suspend the managers of its three branches at Sylhet, Gazipur and Savar for their involvement in suspicious banking transactions.
Information that IBBL and SIBL have links with terror financing, assume significance as it comes from the US Senate Committee report. Given that terrorist financing must be high on the agenda of counter terrorism activity of any country, this comes as highly disconcerting news. Taking advantage of the weak internal governance of the US branch of HSBC, these two banks have been routing funds to different international network suspected to have terrorist links.
Some more information about terror financing in Bangladesh has grabbed attention. IBBL provides JEI an opportunity to launder money from abroad and also channel un-audited funds to various militant groups in the country and abroad. Islamic Bank Foundation (IBF), a JEI floated organization oversees all the projects of IBBL and profits generated by it and the interest / commission accrued on foreign donations goes to the IBBL account of IBF.
The IBF is headed by Mir Qasem Ali, JEI Executive Committee member and Country Director of the Saudi based Islamic NGO Rabeta-al-alam-al-Islami that funds a number of projects in Bangladesh. Mir Quasem Ali, the main brain behind JEI's finances, is now in jail facing trial on war crimes charges. He remained Director of IBBL for a number of years since its inception in 1975.
Some transactions of the Kuwait based international Islamic NGO Revival of Islamic Heritage Society (RIHS) whose bank accounts in Pakistan were seized following the al Qaeda attack on Twin Tower (September 11, 2001), came under scrutiny of the Bangladesh intelligence agencies that were tasked to investigate terror financing in the country following country wide synchronized bomb blasts.
An account of RIHS in IBBL's Uttara branch in Dhaka was closed in 2006 after the intelligence agencies found specific evidence of terror financing from this account. In November 2005, the RIHS had released a sum of Tk 2 Crore from this account to facilitate the advent of suicide bombers in Bangladesh. Moreover the Bangladesh intelligence agencies also found out in course of investigations that two RIHS officials channelised US $ 700,000 to local and foreign terrorist groups.
SIBL, on the other hand, has been carrying out Shariah based Islamic banking in the country for quite some time and has also in course of time developed linkages in India. Executive Vice President of SIBL, Shawkat Ali was apprehended by Kolkata Police and he was expelled from Kolkata in August 2006 for his involvement in undesirable and suspicious activities. SIBL is suspected to be engaged in routing funds to reach Kolkata and from there to other destinations in India and abroad. Main patrons of SIBL are known to be from the Middle East.
The Saudi based Islamic NGO Al Harmain Islamic Foundation which remained associated with Al Qaeda funding and which had set up its office in Dhaka, was known to operate its bank accounts through Al Arafah Islami Bank in Dhaka. The main source of funding of this NGO had been from the royal family of Saudi Arabia. Following the recent bomb blasts in Saudi Arabia and dismantling of its network by the Saudi Government, the outfit came under extensive scrutiny.
Thereafter the Saudi Government requested Bangladesh authorities to ban Al Harmain Islamic Foundation and confiscate its bank accounts and properties. Bangladesh Bank later found that huge funds were transferred from Al Harmain's account in Al Arafa Islami Bank, Rangpur and Cox's Bazar branches, through telephonic instructions to persons who immediately withdrew the amount.
IBBL, SIBL and other Islamic banks operating in Bangladesh have been running their operations under the command and overall supervision of Shura Council comprising some so called Islamic clerics despite the fact that Bangladesh Bank ordered all Islamic banks to operate under authorization of a Governing Board to be nominated by it. In February 2006, under persistent pressure from the JEI which was then a constituent partner of the BNP led ruling alliance, Bangladesh Bank revised its order and finalized some guidelines for Islamic banking making the provision for Shura Council optional. Currently there are no separate guidelines for Islamic banking in the country. Of late, the International Monetary Fund (IMF) has been putting pressure on the Bangladesh authorities to frame laws on Anti Money Laundering and Combating the Financing of Terror (AML/CFT) as well as stepping up surveillance.
The preceding BNP-JEI Alliance government decided in 2006 to privatize one of the major state owned commercial banks, Rupali Bank, estimated to be worth US $ 2 bn. The Saudi prince Bandar bin Sultan bin Abdul Aziz al Saud was poised to take over control of Rupali Bank in exchange for investing US $ 6 bn in Bangladesh. But, the Army backed Caretaker Government of Bangladesh that ruled the country during 2007-08 cancelled the deal with the Saudi prince in March 2008 for the latter's non-compliance with the terms of agreement over payment. With the cancellation of the deal the possibility of un-audited Saudi funds being channelised in a more direct and unregulated manner to promote Islamic terrorism in the Indian subcontinent has been thwarted.
(Dipanjan Roy Chaudhury is a Program Director with Aspen Institute India, New Delhi. The views expressed in the article are of the writer and not IBNS. He can be contacted at firstname.lastname@example.org)